Cohesion Policy

On Tuesday, the European Commission published its Sixth Report on Economic, Social and Territorial Cohesion. The report, which is released every three years and charts the progress in implementing EU Cohesion Policy and European Structural and Investment (ESI) Funds, includes a wealth of evidence and data on the performance of Europe’s member states and regions over the period of the economic crisis. Its publication comes at a particularly important juncture for Ireland, which is in the process of reforming local and regional governance, and finalising its plans on how to use EU funding between 2014 and 2020.

Overall, and unsurprisingly, the key message from the report is that across Europe regional disparities are widening due to the uneven impact of the economic crisis. This is particularly evident with regard to regional unemployment rates. In 2008, five EU regions had an unemployment rate above 20%. In 2013, the number had increased to 27. Among highly-developed member states, Ireland and Spain stand out as having suffered the biggest reduction in employment rates while having the highest productivity gains. Regional disparities within countries have also widened significantly. Between 2008 and 2011, two out of every three EU regions experienced a reduction in GDP per head, with the Border, Midlands and Western region of Ireland amongst those with the steepest decline. Ireland, along with Greece and Spain, also experienced the biggest fall in the EU Human Development Index – which measures health, education and income/employment – between 2008 and 2013.

The Irish case shows some interesting idiosyncrasies which may have some important implications for the framing of future regional and spatial policy. For example, amongst more developed countries across Europe, low work intensity is typically more prevalent in cities, with the exception of Ireland. This clearly reflects national policy of promoting the Dublin city-region as a growth pole for global Foreign Direct Investment, most recently elucidated in the revised statement of government priorities, and the fact that the Irish crisis has been most acute outside cities. However, absolute deprivation rates remain on average 5% higher in cities than in the rest of the country. In respect of R&D – a major focus of Ireland’s drive to attract inward investment – the report states that, because manufacturing is spatially concentrated, it is unrealistic to expect that all regions can reach the Europe 2020 target for R&D spending and many regions should focus instead on other ways to innovate.

In the context of the major local and regional governance reforms ongoing in Ireland, the report notes that EU sub-national governments contribute significantly to public investment. It further finds that this capacity is tightly correlated with the ability of sub-national governments to generate their own autonomous fiscal resources. In 2013, around 55% of total public investment in the EU-28 was carried out by sub-national authorities. However, in the case of Ireland, this share has fallen from 60% in 2000 to just 21% in 2013 – the sharpest decline in Europe. By contrast, central governments in 14 countries, especially in Germany, Lithuania, Sweden and Luxembourg, have increased support to local and regional authorities. The report concludes that it is no coincidence that in most of the countries in which net transfers to sub-national authorities increased, the recession was of limited duration and there was less need for fiscal consolidation.

As regional disparities increase, the importance of Cohesion Policy (worth €1.2 billion to Ireland) as a critical funding lever to suport investments in SMEs, R&D, ICT, energy efficiency, and physical infrastructure, and to cushion the impact of the crisis comes into ever sharper focus. The report places a major emphasis on governance quality and notes that poor quality governance institutions can directly and indirectly hinder social and economic development and limit the impact of Cohesion Policy. The Commission has therefore recognised the central importance of improving governance at all levels and is particularly supportive of the increasing trend towards regionalisation in many parts of the EU. As these sub-national authorities acquire more autonomy and more responsibility for public expenditure, the report endorses the principles of effective and integrated management of public investment recently approved by the OECD.

Gavin Daly

The Commission also launched a new Cohesion Policy open data platform. Users can explore Report data with a range of interactive maps and charts.